A JD.com sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 4, 2017. REUTERS/Aly Song

Advertisement

By Cate CadellBEIJING (Reuters)

Chinese internet giant Tencent Holdings Ltd (0700.HK) said on Monday it would lead an $863 million investment in apparel platform Vipshop Holdings Ltd (VIPS.N), upping its rivalry in retail with Alibaba Group Holding Ltd (BABA.N)

Tencent will invest $604 million for a 7 percent stake, while e-commerce firm JD.com Inc (JD.O), which already owns about 2.5 percent in Vipshop, will invest $259 million to increase its stake to 5.5 percent, the firms said.

A sign of Tencent is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 3, 2017. REUTERS/Aly Song

The deal extends a recent push by Tencent into Alibaba’s home turf of retail, where the firm hopes to leverage its messaging service WeChat and its online payment systems to drive shopping demand.

An app of the Chinese discount online retailer Vipshop Holdings Ltd is seen on a mobile phone in this illustration picture taken December 18, 2017. REUTERS/Florence Lo/Illustration

The looming retail battle reflects a wider, long-running stand-off between Tencent and Alibaba, who have made competing investments in areas as diverse as bike-sharing apps, food delivery and gaming.

“Right now in the Chinese market we have two internet powers,” said Weiwen Han, managing partner for Greater China at Bain & Company. “Investments will either fall into the Alibaba or Tencent camp.”

He added, however, that such deals were difficult to turn into successful ventures.

“It remains to be seen how they will be integrated successfully, (and) whether or not these will actually be effective investments.”

RETAIL FAULT LINES

Alibaba has been looking to reshape the battle lines of China’s online and offline market. Its Tmall and Taobao platforms dominate online and it has invested over $10 billion in a push into brick-and-mortar stores.

It is already a major stakeholder in JD.com

The latest deal, at a 55 percent premium to Vipshop’s closing share price on Friday, will help Tencent tap the firm’s young, female shoppers and give it access to reams of consumer and transaction data to help it compete with Alibaba’s Alipay.

JD.com’s chief executive, Richard Liu, said the move would help “expand the breadth and reach of our fashion business”.

That comes after he said last month around 100 Chinese apparel merchants had left its platform in the last quarter due to what he called “coercive” tactics by competing platforms.